All posts by Hugo Britt

It’s grand-final week at The Faculty. The team has been working towards this week for months – there are whiteboards all over the office covered in scribbled plans and brainstorming, the printer has been running almost continuously and the atmosphere here is at fever-pitch. It’s the week of the 8th Annual Asia-Pacific CPO Forum, a 2-day event where we’ll be hosting no fewer than 56 of the region’s top CPOs, with a collective influence over $180 billion spend.

But that’s not all. This week will see no fewer than six major events, namely the Future Leaders in Procurement Forum (FLiP) followed by the Future Leaders’ Dinner, the National CPO Roundtable Meeting, the CPO Forum itself, an executive breakfast with The Hon. Jeff Kennett, and the CPO Forum Gala Dinner – the networking event of the year if you want to mix with the who’s who of procurement in the Asia Pacific.

The events run over the next three days, and attendees have been arriving at Melbourne Airport to be greeted by typical May gloom – overcast with a threat of rain, and temperatures dropping as low as six degrees tonight. No matter, though – we’re prepared for the usual witty comments about our weather from Sydneysiders and other delegates from the sunny north, and we have such an action-packed program lined up that there’ll be no thought of stepping outside the event venues until the end of each day.

I’m going to cover the events through a series of blogs, bringing you the big ideas, themes, news and surprises from the next three days. There’s so much happening that it’ll be impossible to cover it all, so I’ll be sending you the highlights, along with the key take-outs from my colleagues and the attendees. Lisa Malone is here representing the team at Procurious, and she tells me to keep an eye on the hashtags #CPOforum15 and #FLiP15 @TheFacultyHQ.

So, what’s happening today?

There are two major events happening concurrently today, catering to two sets of attendees in very different stages of their careers. At Melbourne’s Park Hyatt Hotel, 32 delegates are gathering for the Future Leaders in Procurement (FLiP) forum. Who are they? They’re category managers, procurement analysts, sourcing specialists and other role-holders from organisations all over the region, and as the name of the event suggests, they’re the region’s future leaders of the procurement profession. Nurturing these top-performers and giving them every opportunity to develop their leadership capabilities, define their career paths and expand their professional networks is an absolutely key part of the much-discussed “war for talent”. The very fact that these 32 rising stars are in attendance today is a fantastic reflection on the organisations they represent – these companies have recognised and rewarded their most talented individuals by making the time and resources available for them to attend. That’s a big deal, when you consider the frenetic pace of modern procurement careers and the rare chances we get to come up for air, focus on ourselves and consider what’s ahead.

The FLiP delegates have a huge day ahead. They’ll be learning from some of the nation’s leading CPOs including Keith Bird (QLD Rail), Andrew Ordish (AMP) and Cindy Dunham (Fortescue), along with experts on the human side of being a leader (team-building, trust-building and understanding customer mindsets) – Dave Lourdes (Evolving Human Potential) and Dan Gregory (CEO of The Impossible Institute and a regular on ABC’s Gruen Transfer). Other big names include Holly Ransom (Chief of Staff to the NAB Wealth Chief Executive and one of Financial Review’s 100 Most Influential Women), who will challenge delegates to smash through their comfort zones and practice big-picture thinking. Laurel Papworth (Forbes Top 50 Social Media Influencers and Educator, UNSW) will guide the attendees through the critical role of social media and its power to drive deeper market insights and foster supplier innovation.

Meanwhile, here at The Faculty headquarters, the biggest players in the business are arriving for the National CPO Roundtable Meeting. The Roundtables for Melbourne, Sydney, Brisbane and Perth meet on a quarterly basis, but this gathering is the only opportunity in the year for all 26 attendees to meet as a group. They’re here today because they recognise the immense opportunities offered by networking with their cross-sector peers, the benefits gained from procurement market intelligence and the unparalleled power of collaborative learning. I’m privileged to be sitting in on their meeting today and I’m aware that up-and-coming procurement professionals such as those gathering at the FLiP forum would give anything to be a fly on the wall in this room. In fact, we’re confident that when the time comes, a number of the FLiP attendees will one day take their own places at this meeting, and that’s very exciting.

The CPOs will be sharing their challenges for the financial year ahead and exploring the critical issues facing them individually and collectively. They’ll be hearing from The Faculty’s Founding Chairman Tania Seary on The Big Ideas Summit that was recently such a success in London, and from Braam Uys (Rio Tinto) on his “Iron Fist in a Velvet Glove” approach to supplier relationship management. We’re expecting some provocative ideas to come out of the group discussions, and looking forward to those “a-ha!” moments where one CPO is able to provide a solution to another’s challenge.

Coming together

So, the two meetings today have different agendas but there are certainly some common themes that will be tackled by the two groups – leadership, embedding change, raising the profile of procurement and, most of all, networking. The most exciting part of the day, for me, will come at 4.00pm when the CPOs wrap up their meeting and walk the two blocks to the Park Hyatt to offer the FLiP delegates a CPO Mentoring Masterclass. By this point of the day, the “FLiPpers” will be bursting with new ideas, inspiration and excitement about taking their learnings back to their organisations. They’ll get the opportunity to bounce these ideas off the CPOs, or perhaps seek advice on their greatest challenges, or simply discuss their vision for a stellar career path in procurement.

As exciting as the day ahead will be, I have to keep reminding myself that it’s only a preliminary to the main event ahead – the CPO Forum. But I’ll save that for another blog. The CPOs are coming through the door, so I’m going to get a coffee and settle in to find out what the future holds in store for procurement in the Asia-Pacific.

This article is part of a series about Hugo’s visit to ISM2015 in Phoenix, Arizona. Today Hugo discovers that Talk Radio and Jazz music have found a home on the exhibition floor…

So, it turns out that it does rain in Phoenix after all. The storm started while I was trundling through the city on the light rail to my hotel just north of downtown, and was at its heaviest by the time I alighted. I didn’t have a chance of staying dry and was soaked to the skin before I’d made it even half the distance. And I really do mean soaked to the skin – sopping shirt, pants, shoes, socks, even the papers in my pocket turned into a pulpy mess. I hurried on, praying that my bag would keep the water from reaching my laptop (incredibly, it did – thanks Crumpler), and sloshed my way into the hotel foyer to be greeted by gales of laughter from the staff behind the front desk. “Man, I’d hate to feel the way you look,” said one wise-cracking security guard.

Anyway. Dry and warm now, and ready to write. The first thing I noticed when I walked into the conference centre this morning was a jazz band in full swing, just like the conference itself. As expected, the crowd was much thicker than yesterday, the stairways and escalators jammed with a slow-moving mass of people. I visited the press room and met some lovely media experts, namely Mike Scott of MCCI Integrated Marketing, followed by Jennifer Shore of ThomasNet and Erin Vadala, Sadie Smith and Dawn Ringel of Warner Communications. To my foreigner’s ears, I thought Dawn introduced herself as “Don” but it’s just those pesky differences in accent again (I’d pronounce it “Dorn”). Don/Dawn invited me to two exciting press conferences (more information to come soon) and I walked out feeling I now had plenty of support and a home base at the conference.

Walking the exhibit hall floor

Downstairs, the wraps had come off the exhibit hall and delegates were pouring through the doors. I spent every spare minute today wandering around the hall, overwhelmed at first by no fewer than 120 exhibitors showing their products and services. I found my way to the pile of bagels and huge vats of Starbucks coffee at the centre of the floor to fortify myself before making my way through the aisles in a methodical manner.

There is such a wealth of information to be found at these exhibitions and I quickly gave up trying to collect all the documents and samples on offer. Some of these companies are offering similar products and competing for the delegates’ business, but one of the first things I noticed was the huge range of services on offer. From travel management to security services, ERP systems to research offerings, credit and staffing agencies, fleet management, universities, media companies, risk management solutions and more. I came to a stop at the booth belonging to PADT Inc. (Phoenix Analysis and Design Technologies), where I goggled at the 3D printer like a country bumpkin seeing his first escalator. Eric Miller, a 3D printing guru, had a rapidly-growing pile of plastic gizmos sitting on the counter that the machine was churning out – little ISM2015 badges, plastic gears and something that looked a bit like a Rubik’s Cube. I decided then and there that I would attend Eric’s session that morning to try to understand a little more about the technology.

I’d noticed a couple of middle-aged gentlemen wandering around in gaudy yellow jackets, black shirts and yellow ties yesterday, and discovered them sitting under a sign for “Manufacturing Talk Radio” in the middle of a live broadcast. They were interviewing one of the exhibitors who was eager to get the word out about his company, asking him questions in that deep, booming voice you only hear from radio folk who’ve spent decades talking into a microphone.

As I walked past the displays, the exhibitors would catch my attention and wave me over to tell me about what they do and what’s on offer. There are so many companies here, most of which I’d never heard of back home apart from the very biggest players. I was particularly impressed by a demonstration given by Kristin Carty of ThomasNet, a very famous name in US procurement. ThomasNet is the modern incarnation of Thomas’ Register of American Manufacturers, a 34-volume buying guide offering sourcing information for thousands of products. It was first published in 1898, meaning that my friendly host Kirsty could point with confidence to 117 years of sourcing and supplier discover knowledge passed down through her organisation. It’s lucky they’ve gone digital since the nineteenth century because ThomasNet now has 700,000 US and Canadian suppliers in its database, split into 60,000 categories. The magic is in the search tool, where Kirsty showed me how to qualify suppliers by location, ownership type (diversity) and quality certifications. Each supplier has a detailed information pack available at the click of a button, including product and capability catalogues, line cards, 2D and 3D CAD drawings, case studies, white papers, photos, videos, news releases, key contacts, brands distributed or manufactured, financial information and more. It’s free to use and it’s in suppliers’ best interests to be on the ThomasNet database and to provide as much supplementary information as possible to help buyers make their choice. I’ll be meeting with ThomasNet again tomorrow as they’re one of the sponsors and key drivers of the “30 Under 30 Rising Supply Chain Stars” initiative – but I’ll save that for another blog.

As I hurried off to the 3D printing conference session, I was again struck by the buzz in the hall. All around me, people were networking, chatting and laughing, yet underneath the friendly atmosphere I was aware that the exhibitors were locking in some major agreements worth untold amounts with those delegates who had the authority to make a deal on the spot. For some, the exhibit hall floor is the focal point and the major reason for attending the conference, with all of the educative sessions an added bonus, while others may see things the other way around.

This article is part of a series about Hugo’s visit to ISM2015 in Phoenix, Arizona. Today Hugo listened to Thomas J. Kull, Associate Professor of Supply Chain Management (Arizona State University) discuss behaviour under uncertainty with the Total Cost of Ownership (TCO) model.

designer491/Shutterstock.com

I attended this session for two reasons – a) this talk was marked as “essential” level, and b) I’d pretended to know what TCO was recently in a discussion with a senior consultant at the office, so this was my chance to find out.

Thomas Kull researchers behavioural and risk issues in the supply chain, and has recently turned his attention to minimising uncertainty in the TCO model. In other words, he’s interested in the human side. And there’s a big human side – due to the estimation involved, there are a number of points of subjectivity that are necessarily part of this process.

Kull structured his presentation around a typical TCO model before exploring modes of socio-psychological influences and their implications for practising TCO.

The typical TCO methodology is to try to boil down all the ramifications that go along with a certain spend item to a hard dollar figure. It is then used to determine and compare alternatives. This figure should be captured before you acquire the spend item or venture into a relationship with the supplier. To capture the ramifications of using the item, purchase price, acquisition costs, usage costs and end-of-life costs are estimated using the following steps:

Process mapping and TCO categories

Subcategory elements identification

Cost element measurement

Data gathering and cost estimation

Cost timeline mapping

Present value determination.

There are costs involved before the item is acquired: the costs of the negotiation process, the system necessary to put in place, extensive contract review processes, the management structure needed for managing the relationship. There are a lot of estimates here, and Kull notes that we don’t usually bring crystal balls to the office with us, so judgement, experience and knowledge are essential.

Kull presented a typical TCO Model example for buying computers that has a dollar figure down to a very exact number (two decimal places), and demonstrated how full it is of values and judgements. He advised that CPOs should be suspicious of an exact dollar figure and always ask to be shown where the guesses are. Some systems give ranges because they know there’s a lot of uncertainty. He noted that of all the cost categories, Usage Costs are often the bulk of the pricing and also the bulk of the subjectivity.

Kull then took us through a brief run-down of social psychology at different levels with some fascinating examples for each – person-centric, team-centric, organisation-centric and society-centric. Each level had uncertainty or ambiguity that can potentially result in inaccurate estimates and inappropriate actions. Some of the behaviour included:

Evaluability bias – the tendency to weight the importance of an attribute in proportion to its ease of evaluation, meaning people devalue certain elements because they are too hard to evaluate. Also leads to higher risk perception and risk avoidance.

Group polarisation. Kull ran through studies that demonstrated the dangers of “group think” – people in a group tend to get carried away and take a decision to the extreme, resulting in a very high or very low cost estimate, but never the middle-ground.

Decision norm. Managers will often prefer to use their gut feeling despite evidence presented to them, and 50% of companies are structured to prevent the effective use of analytics to manage this. Decisions can be made on an intuitive versus a rational basis.

Dimensions of culture. Some cultures have a high level of assertiveness (take the “just do it” US stereotype) while others have a high tendency towards uncertainty avoidance. High assertiveness has the benefit of giving people greater control over an outcome, while high uncertainty avoidance leads more collective responsibility, system and tools.

Kull also pointed out that while we do a TCO for comparisons’ sake, people often “have a decision made before they have to make a decision”. Perhaps unintentionally, they add bias because they want a certain result.

So, what’s the solution? Kull had some ideas but also put out a call for procurement organisations to help advance his research into this topic. He suggested:

When using TCO, be relative and comparative – not absolute.

Smart global players adapt to local culture, let their systems adapt and don’t try to take a generic approach.

To fix group-think, ensure you have diversity of opinion within your TCO team – this is where a devil’s advocate (contrarian) plays an important role.

Use 3rd party or secondary data for triangulation.

Get to know the potential biases in your TCO and embrace them.

Kull concluded by stressing the importance of people in the TCO process. By its nature, TCO makes the people who are part of it very valuable. If we were just evaluating quotes, we wouldn’t need supply chain professionals with MBAs – it’s the judgement, experience and knowledge that are critical to making those subjective estimates.

Well, that’s it from me for today. As I mentioned above, tomorrow is looking to be a massive day for ISM2015 – I’ll be meeting my fellow members of the press, joining a media conference, and of course attending some more of the fascinating conference sessions.

This article is part of a series about Hugo’s visit to ISM2015 in Phoenix, Arizona. Today he tells the memoirs of a secretary at war…

Valerii Iavtushenko/Shutterstock.com

Robert Gates is undoubtedly the most high-profile speaker I’ve had the chance to listen to in the flesh. Former Director of the CIA and Secretary of Defence under two very different US presidents, George W Bush and Barack Obama, Gates made the point that over his career in Washington he actually worked for no fewer than eight presidents.

He began by putting out a request to the assembled businesspeople to hire some of the million soldiers, sailors and airmen leaving military service over the next few years who will be looking for fulfilling careers, saying that they will be some of the most resourceful candidates available for hire. Gates comes across as somewhat pessimistic throughout most of his speech, except when he touches on the subject of servicemen and servicewomen, speaking optimistically and warmly of the great potential of America’s youth.

He’s scathing about Washington DC, referring to it as the “city of egos” and he is no fan of LBJ, a big fan of Reagan, and speaks of the surprising similarities in the leadership styles and strategic choices made by George Bush and Barack Obama. The continuity of security policy across the last two years of Bush’s presidency and the first two years of Obama’s was in no small part due to Gate’s presence, with fundamental national interests and strategic choices remaining steady. He notes, however, that the current situation in Iraq and Afghanistan is blamed equally on Bush for invading, and Obama for withdrawing too soon.

After this brief introduction including some jokes about stupidity in Washington DC and LBJ’s stupendous ego, Gates launches on an absolutely fascinating summary of the state of the world’s security situation. He begins with the consequences and message sent by Obama’s withdrawal from Iraq and Afghanistan, widens his focus to the whole of the Middle East; ISIS, Syria, Libya, Saudi Arabia, Iran and his grave concerns about the recent nuclear agreement, Yemen, Egypt, Turkey, Jordon, Lebanon – before turning east to the unsustainable growth of China and north to Putin’s Russia, Ukraine and the Crimea before finishing with Cuba. He has an all-encompassing world-view and draws repeatedly on history – WWII, the Cold War and the collapse of the Soviet Union, the hopelessness of artificially created borders drawn up by the victorious powers after WWI. Some notable quotes from this part of his speech include:

“If we treat China as an enemy it will very soon become one.”

“Nationalism is easily stoked but hard to control.”

“We can expect more attempts by Russia to thwart US influence.”

“The greatest challenge to national security and the global economy is not an international threat – it can be found in the two square miles around Capitol Hill in Washington.”

Gates then pulled his focus back to the US and told the audience that in his opinion, all of the county’s security woes were self-inflicted. He dwelt on the cuts to defence spending and the instability caused by the withdrawal of US world leadership. He touched on the low rating given to terrorism risk in the audience poll [see previous blog post], agreeing with the 5% figure and noting that terrorist attacks were not an existential threat but rather something that can be managed and suppressed (on American soil, at least) in much the same way as crime. He points out that attacks like Fort Hood, the Boston Bombing and Charlie Hebdo are not disruptive in that they do not affect people’s ability to carry on with their lives and continue to do business.

To summarise the main take-outs for procurement professionals from Gate’s speech:

Supply chain disruption from global/cataclysmic conflict has diminished dramatically while the potential for localised conflict is very high.

International commerce, energy supplies, freedom of navigation and other factors that affect supply chains depend not on events happening overseas but on decisions made in the US.

When doing business with the Middle East and North Africa, most states have a good deal of stability apart from the ones already regarded as “failed” – Syria, Libya, Yemen, potentially Lebanon and Iraq.

On negotiation: the worst possible position to be in is an unwillingness to walk away from the negotiation table.

Young people he has seen (particularly those in uniform) are of an extraordinary quality – they’re smart, eager and they care about things.

The most important trait for a leader is a willingness to surround yourself with smart people and listen to them.

Gates received a standing ovation from an audience that knew how privileged they were to hear from such a great mind. A brilliant opener to ISM2015 that really set the standard for the rest of the conference.

This article is part of a series about Hugo’s visit to ISM2015 in Phoenix, Arizona. Here Hugo swaps sweeping desert for expansive conference floor…

First impressions? The Phoenix Convention Centre is spectacular, both on the inside and outside. Architecturally stunning like most of downtown Phoenix, the building looks like it could easily absorb ISM2015 three times over with room to spare, though I’m yet to see what it’s like with every delegate crowding into the building. The Exhibit Hall remained tantalisingly closed today while the exhibitors set up their displays, so I wandered around the accessible areas with my lanyard around my neck and showbag full of procurement-related goodies in my hand. I even stepped into the neighbouring performing arts centre to get a glimpse of the concert hall but was hustled out by security.

As a guest blogger, I have a ‘media’ badge attached to my lanyard, which I think is pretty cool. I’d like to stick it in the ribbon of my hat the way reporters wore their press IDs in old movies, but a) people might think I’m strange, and b) I don’t have a ribbon on my hat. I’ve been invited to the press room tomorrow morning, which I envision as filled with tobacco-smoke and weathered reporters tapping furiously on noisy typewriters (I know, I watch too many old movies). It’s more likely to be a plain room with PowerPoint capabilities and a handy Wi-Fi connection.

The crowd waiting for the first keynote speaker was buzzing with chatter, making me appreciate that aside from the huge line-up of events, perhaps the single most important aspect of this conference was the networking. ISM has put plenty of time aside to dedicate to networking – there’s a welcome reception tonight, two networking breakfasts, two “dessert receptions” over the lunch hour (I like the sound of that) and networking receptions in the exhibitor hall at the end of each day, for which I am the excited holder of two complimentary drink vouchers. Everyone in the crowd before me is chatting – and I mean everyone. No one is standing by themselves looking lost or awkward, which can be attributed either to the fact that everyone in procurement knows each other, or perhaps they’ve all been to ISM conferences in the past, or maybe it’s just the convivial American temperament that makes it so easy to meet new people. I can pick out a few different languages and accents in the crowd – a fair number of Chinese attendees, some UK accents, French and Spanish speakers and the full spectrum of regional accents from all over the States. I haven’t picked up any Aussie accents just yet, but I’ll keep my ears open tomorrow.

One of the most difficult parts of attending ISM2015 is the sheer volume of events that run concurrently. For example, if I attend a two-and-a-quarter-hour “Signature Session” tomorrow morning, I’ll be missing out on no fewer than twenty-four other sessions – just incredible. It demonstrates the sheer size of this event and makes selection a hand-wringing process, but ISM comes to attendees’ assistance by offering Learning Tracks and audience levels. The Learning Tracks create a clear pathway through the bewildering array of sessions that you can choose to follow, or to mix and match as I have done. The Tracks are:

High Performing Value Chain Management

Best Practices in Procurement

Strategic Partnership

Risk Management

Leadership Strategies

Delivering Financial Results

Strategic Profitable Growth

Each event has a Learning Track listed against it and also a recommended audience level:

Essentials (for professionals new to supply chain management)

Experienced (next level up)

Leadership (professionals in executive and leadership positions with more than ten years of experience).

ISM has also created a handy App to select events, create a schedule, give feedback and other features. I’ll definitely need it tomorrow when I’m dashing from session to session all over the massive convention centre.

ISM in the spotlight

ISM knows how to put on a show. Even though the grand opening is tomorrow morning and the conference crowd is not yet at full size, this keynote speech is the first official event of the conference. The lights suddenly dim in the cavernous hall (massive, but not even the biggest in the building), the crowd falls silent and a single figure stands on stage in a spotlight. “The future demands us to innovate!” he begins, sharing a vision of the future for procurement. He is followed by five other illuminated figures, all beginning with the formula “the future demands”.

This is the theme of the conference. ISM turns 100 this year, but the CEO Thomas Derry tells us that the organisation is looking to the future. Derry introduces the crowd to the innovative snap poll system where we used our phones there and then to vote on a question put to the audience. As a researcher I was very impressed to see the bar graph on the big screen rapidly changing as responses flowed in to the question: “What global threats are most likely to disrupt your business or supply chains?” Results were:

Economic collapse abroad: 39%

War or terrorism: 5%

Direct or indirect cyber-attacks: 30%

Natural disasters: 20%

Other: 6%

The surprises for me here were the low score for terrorism and the high score for cyber-attacks – a flick through the program confirmed there’s an entire conference session devoted to protecting against cyber-attacks, so this is certainly front-of-mind in the procurement world.

After a few more preliminaries, the audience bursts into applause as the familiar figure of Robert Gates, former Director of the CIA and US Secretary of Defence, steps onto the stage. It’s not often you get to hear from someone who has directly shaped the history of the modern world, and he didn’t disappoint.

In the first of a series of articles, The Faculty’s Hugo Britt takes us on a journey to the Institute of Supply Management’s annual conference. But first he must contend with Camelback Mountain…

Today, in Phoenix Arizona, I climbed the stairwell of the Empire State Building. Well, not the Empire State itself, but rather its equivalent – the Echo Canyon Trail to the peak of Mount Camelback. That’s what the colourful sign at the trailhead told me, anyway, along with a dire warning (unheeded) about the difficulty of trail. But more on that later. I’m here in Phoenix to attend the ISM2015 Annual Conference, one of the premier events for procurement professionals internationally.

First off, I’d like to thank my hosts at ISM (for those not in the know, ISM is the Institute for Supply Management, one of the largest supply management associations in the world) for their generous invitation and my employer, The Faculty Management Consultants, for supporting my attendance.

Today was only a short day at ISM2015, with a keynote speaker and a single conference session, so for this initial entry I thought I’d set the scene with my experiences as a first-time visitor to the US (not counting Hawaii) and my near-death experience on Camelback. The conference’s grand opening is in fact tomorrow, which promises to be an action-packed day full of procurement gems that I’ll be sure to share with you.

To introduce myself, I’m a 30-something-year-old research consultant from Melbourne, Australia, who doesn’t do particularly well in the heat. I’m lucky to have landed in Arizona in spring, as a 30 o C day is much more bearable than Phoenix’s hottest-recorded summer high of 50o C. Even at 30 degrees, I’m dashing from shade patch to shade patch, wearing my battered old akubra that I thought may pass for the local cowboy hat (it doesn’t). As suggested by my job title, I’m a researcher specialising in procurement, but it’s early days yet – I only joined The Faculty in November 2014 and as such am in what I call “sponge mode”, soaking up everything I can on how procurement works with the long-term goal of becoming a procurement guru like my colleagues at the office. The sponge metaphor is actually quite apt, as my expectation that procurement would be a dry topic was very quickly overturned when I discovered the industry to be absolutely fascinating with boundless areas of investigation, a truly international outlook and incredibly passionate people.

I flew in on Saturday afternoon on a 50-seater jet out of Los Angeles. Bleary from the previous 13-hour leg from Melbourne, I was nodding off when a glance out the window jolted me into full wakefulness. The desert below me was just incredible – blinding white sands, abrupt rocky ranges, dried river systems spreading through the landscape like bronchioles, and patchwork clusters of irrigated farms around the two major waterways visible from the air, the Salton Sea and Colorado River. Phoenix itself swung into view and my first thought was how improbable its very existence seemed in such a hostile landscape. The sprawling suburbs hold 4.3 million people, with row upon row of identical terracotta-coloured rooftops and tiny pools glinting in backyards. The city centre itself (“downtown” in local parlance) seems very compact from the air and I strained in my seat to pick out the Phoenix Convention Centre, the venue for ISM2015.

Americanisms

Now, I know there’ll be some American readers of this blog who may be puzzled by my harping on certain parts of my experience, but some things seem so quintessentially “American” that I can’t resist including them here for non-US readers. Namely:

Tipping – so straightforward to Americans yet a minefield for foreigners like me. Who should I tip? Everyone that I make a monetary transaction with who isn’t a machine? How much? Have I offended by giving too little? Did I just give that waiter way too much?

American fare – my room service menu offers the following delights:

Jalapeno bacon and pistachio brittle

Tater tots

Sweet potato fries with marshmallow drizzle and candied pecans

Quico corn nut pie

Crispy chicken wings with blue cheese dressing

Fried whisky sour pickles with horseradish buttermilk dressing.

Super-friendliness – people from Phoenix (Phoenicians?) go out of their way to say hello to strangers – lovely!

How I nearly died on Camelback Mountain

I only had one gap in my schedule to go on an outing, so on Sunday morning I took it. I was up bright and early to grab a hotel breakfast (Fruit Loops; don’t tell my wife), jumped in a cab and headed to Camelback via Paradise Valley. The aforementioned sign at the trailhead warned that the second half of the climb was rated “extremely difficult”, at which I scoffed merrily and started on up. Ten minutes later I was still scoffing about the overblown rating when the sun heaved itself above the range … and I was flattened. It was hot. Heat was beating down upon my hat, reflecting off the rock walls on either side of me, shimmering up from the rock face at my feet – awful. My steady trot slowed down to a sweaty crawl (literally a crawl in some sections that required hands as well as feet) and I cursed my hubris. But the heat wasn’t what nearly killed me. What nearly killed me was narrowly avoiding stepping on a Mohave Rattlesnake on the edge of the path. I’m pretty good at understanding American accents, but I wasn’t quick enough to interpret what the guy behind me was yelling. I thought he said something like “heaven’s sake”, but he was actually warning, “there’s a snake” just before my foot when down right next to its head and, thankfully, it darted under a rock rather than going for my ankle. I also saw two fat-bellied Chuckwallas (we call them goannas back home), the Saguaro Cactus (a local icon which grows up to 50 feet tall) and the squat Compass Barrel Cactus.

Standing on the top, I was rewarded with an incredible panorama of the city and surrounding peaks disappearing into the haze. Phoenix is greener than you’d expect, especially in the wealthier areas, and of course the city’s famous golf courses. I was looking down on a particularly beautiful course directly below Camelback, wondering if it was the location of the first event of the conference, the ISM2015 golf tournament. I’d chosen to climb a peak rather than play golf (I can imagine my golf-mad colleague Chris shaking his head in dismay as he reads this) but the rewarding view convinced me I’d made the right choice. Besides, I hadn’t packed my chequered knickerbockers (or whatever it is that golfers wear).

Big Data! It’s the catch-cry of 2015 and the movement shows every sign of gathering momentum. Article after article has been written on why your business can’t afford to ignore it, and the term has even earned itself a capital B and D, demonstrating just how excited everybody is about the concept.

Yet our benchmarking exercise shows that Australian procurement functions may need to recalibrate their thinking about the skill levels required by the two job-families every team needs before attempting to harness Big Data – technology and analytics.

As part of The Faculty’s 2014 research into capability assessments, research champions from 19 organisations participated in workshops to establish competency benchmarks for six job families within the procurement function: Strategic Sourcing, Category Management, Analytics, Operations, Supplier Relationship Management (SRM) and Supply Chain. The participants were asked to benchmark the competency levels (Awareness, Functioning, Skilled or Mastery) that they believed should be held by different levels of seniority across the above-mentioned job families. The results were then validated by The Faculty Roundtable, consisting of CPOs from 30 of Australia’s largest blue-chip organisations.

Neglect technology skills at your own risk

Two surprises came out of the results. Firstly, there was an anomalous gap at the principal level for the key competency “utilising technology and tools”. Have a look at the radar graph for Category Management (yes, I know the shape in the middle looks like a bird’s head):

Competency levels

1 – Awareness 2 – Functioning 3 – Skilled 4 – Mastery

Out of the six job families, only Operations had a mastery-level benchmark flagged for this competency. In practice, this means that the most senior staff across five job families in the procurement function were content to have no one in their team who were expert users of procurement-related tools. In the case of the SRM job family, the highest competency level for tech was only “Functioning”.

So, what are the possible reasons for this gap, and what are the risks of having a comparatively low benchmark for technology and tools?

Well, one reason may be that most organisations have a dedicated IT team to whom you can outsource your IT-related projects. The trouble with relying on this crew is that the IT team are not procurement experts. Having a scattering of tools-and-tech gurus amongst your own procurement team would be infinitely more valuable than working with an IT generalist, as the marrying of tech skills with procurement know-how can open the door to a potential flood of efficiency and innovation.

The second reason may be generational. At the risk of sounding ageist, we can assume that, generally, the most senior role-holders in your procurement team have more years under their belts than others and may be unwilling to engage with rapidly-changing technology. The tendency, then, may be to leave the usage of technology and tools to junior role-holders, with the risk that critical business tools are operated by staff who lack the experience (and seniority) to make informed decisions. Leaving the mastery of such skills to junior role-holders also means you are reliant on the advice of inexperienced staff or outsourced expertise when deciding on major technology investments, an area in which mistakes can be very expensive.

If the problem is indeed generational, then the good news is that the competency gap will resolve itself in time as technically-savvy members of Gen-X and Y step into senior roles. In the meantime, you might consider “reverse-mentoring”, where the junior in the relationship takes on the role of mentor to provide their senior colleague with up-to-date information and advocate the benefits of new procurement technology and tools.

Don’t neglect your analysts

A highly-skilled team of analysts is worth its weight in gold, yet the results from our benchmarking exercise didn’t reflect this:

Competency levels

1 – Awareness 2 – Functioning 3 – Skilled 4 – Mastery

Even a brief glance at the above chart shows that Analytics has a lower level of expected competency almost across the board, with the exception of “cost leadership” and “determining customer need”. This is concerning, given the vital role of this job family and the potential involved in harnessing big data to generate innovation. In practice, the chart above suggests that the most senior analyst in a procurement team is not expected to demonstrate leadership and only expected to have medium- to low-level competency in supply strategy and managing supply chain risk. To me, the benchmarks are more reflective of a non-specialising analyst (much like the IT generalists mentioned above) rather than a member of the procurement function who specialises in analytics.

The strong potential of a high-performing analytics team was demonstrated at the 54-hour “Unearthed Hackathon” in early 2014, where competing teams of number-hungry analysts were given access to Big Mining Data – specifically, transport, logistical, geospatial and geological proprietary data. One of the teams worked out a way to integrate technology into tray trucks that detects when boulders are too large for rock crushers and sounds an alarm to prevent potential blockages. The organisers estimated that this idea alone would save millions for Rio Tinto and other miners – yet it took these boffins only 54 hours to analyse and solve the problem.

We need to master both soft and hard skills

A recurring theme to come out of The Faculty’s capability research was the need for procurement teams to develop those hard-to-define “softer skills”; that is, leading, influencing and negotiating. At the same time, we cannot afford to neglect the “hard skills”, even at the most senior level when leaders step into a more strategic role. An enormous amount is expected of 21st-century procurement teams and we can’t be expert at everything, but if you’re going to neglect one competency to focus on mastering another, do your best not to neglect procurement technology, tools or analytics.

Finally, if you’re an up-and-coming procurement professional who also happens to be a master of tools and tech or an analytics whiz, I’d say you’re in a very good position for a stellar career.

Procurement is the fastest-growing sector in the Asia-Pacific with a rapidly-emerging talent gap problem. Procurement leaders are well-aware of the existing “war for talent”, particularly in a profession that still suffers from a lack of targeted higher-education courses. The role of on-the-job training is therefore vital, yet budgets are limited, with an average of $3000 to $3500 allocated per person per annum for skill development. This is where capability assessments play such an important role – they help identify the skills the team possesses as well as those that are lacking to ensure gap-measures are targeted and effective. In other words, capability assessments help you make every dollar count when closing skill gaps.

This article is a call to action for procurement leaders to conduct a capability assessment and create a subsequent business-case for investment in team development, paving the way for improved staff retention, lower hiring costs, uplift in team performance and resultant value delivery.

There is a pressing need to develop and implement fact-based capability plans…

In 2011 the Australian Chamber of Commerce and Industry (ACCI) conducted a survey entitled Employers’ Commitment to Training, concluding that only 80 per cent of employees possessed the skills required to perform their jobs.[1] More concerning was the statement that this figure was predicted to drop to 75 per cent by 2015. The procurement sector is no exception, with the Deloitte Global CPO Survey 2014 finding that 81 per cent of CPOs in the Asia-Pacific region feel that their teams lack the skills needed to deliver their procurement strategy.[2] Workforce capability was nominated as one of the highest business priorities for 2014 by The Faculty Roundtable, consisting of an elite group of procurement decision-makers representing 30 blue-chip organisations in the Asia-Pacific region.

People are a business’ great competitive advantage. Success is dependent on the ability to attract, retain and manage individuals with the right mix of skills and capabilities. Investing in people development will equip a business with the right blend of technical, commercial and leadership skills to accelerate performance and provide a clear career roadmap to engage and retain top performers. Employees provide value to organisations and, as more and more organisations recognise this, there is an increasing focus on developing the capabilities of their best talent.

…Yet only half of our surveyed organisations are using capability assessments.

The Faculty’s survey of 70 ASX-listed organisations revealed that only 54 per cent of respondents currently undertake some form of capability assessment in their organisations, highlighting an incongruence between the perceived need for capability assessments and the number of organisations acting upon this need.

So, what’s holding organisations back?

Every organisation has different priorities, but four recurring reasons for not making use of a capability assessment have emerged:

It’s easier to fill skill-gaps through external hiring than to identify and address the capability gaps in my existing team.

47 per cent of our respondents stated they have more external hires than internal promotions, while 16 per cent had more internal promotions than external hires, and 37 per cent stated they had a balance between the two. This issue is inextricably linked to the shift from long-term to short-term retention of staff and the resultant hesitation to invest in people who are likely to leave your organisation. Capability assessments, training plans and clearly-articulated career paths, however, are some of the most effective tools that managers can use to reverse this trend and improve staff retention.

This is not to say that capability assessments can’t also be used as part of your external hiring process. 43 per cent of our surveyed organisations do not currently do so, passing up an opportunity to pinpoint the required skills by linking the position description to a web-based capability assessment. The online assessment could focus on core procurement skills and complement (rather than supercede) traditional face-to-face interviews to determine subjective factors such as cultural fit.

My team is nervous about being assessed.

Any form of assessment can make staff uncomfortable and risks being interpreted as a performance-management exercise. Careful positioning and communication is therefore vital to let staff know exactly what’s in it for them, as discussed in last week’s article.

I don’t have the resources to roll out a capability assessment.

The initial set-up of a capability assessment will require an investment of both time and money, depending on whether you elect to use an off-the-shelf assessment or require a more tailored approach to meet your specific needs (as was the case with 61 per cent of our respondents). The potential benefits and longer-term savings, however, are enormous – targeted gap-closure, lower hiring costs and improved staff retention to name a few, followed by an established benchmarking and measurement process that you can undertake as regularly as necessary.

The last capability assessment we rolled out was ineffective.

It’s all about the follow-up. Undertaking a capability assessment may provide you with some interesting results, but what you do with them is more important. Before beginning the assessment, create a gap-closure plan that incorporates a blended approach of formal training, on-the-job coaching and mentoring. A surprisingly high 70 per cent of our survey respondents reported that they were unable to measure the impact of capability assessments in the past, making it very difficult to judge its effectiveness. The solution is to measure your team’s competencies immediately before and after your gap-closure rollout to ensure you capture the gains you’ve made and further opportunities to be addressed.

Still unsure?

If you’re in the Asia-Pacific region, give us a call – The Faculty offers a range of procurement capability uplift training programs, consulting services and a procurement-specific capability assessment that can be tailored to your needs. Rolling out a capability assessment will help you anticipate the development needs of your team for the coming decade and ultimately assist in the creation of a business-case to invest in your most important asset, your people.

[1] Australian Chamber of Commerce and Industry (ACCI). Employers’ Commitment to Training: Key findings from the ACCI National Workplace Skills Survey 2010 (2011).

Picture this – you manage a team with a mixed bag of competencies and you are very aware that skill gaps need to be identified and addressed before they frustrate the execution of your strategy. You decide that rather than hiring externally, you’re going to upskill your existing team with a smart mixture of formal training, on-the-job coaching and mentoring. What’s the best way to go about it? You could launch an expensive hit-and-miss generalised training program for the whole team, or you could spend your limited development budget wisely by rolling out a capability assessment first to identify and target competency gaps.

You make your decision, find a great online capability assessment tool that suits your needs, and dash off a quick email to your team informing them that they’ll be undertaking a capability assessment next week…

… and suddenly you have a revolt on your hands.

What went wrong? Any form of assessment can understandably create anxiety, with people’s immediate reaction being that it’s some sort of performance management exercise. And when management rolls out a performance management program, we all know what’s coming next. Positioning and communication, therefore, is absolutely imperative before introducing a capability assessment.

The ‘quick email’ mentioned above should have been a carefully crafted piece of communication to the team about why a capability assessment is being carried out to gain trust and create buy-in for the process. In The Faculty’s 2014 Mind The Gap report on procurement capability, survey respondents nominated “positioning and communication” as the single most important factor in running a successful capability assessment. A surprisingly high 52.5% of respondents who had carried out a capability assessment reported that it had a negative impact, which may very well be attributed to confusion or distrust from their teams about why an assessment was being conducted.

Explicitly assure your staff that the assessment isn’t a performance management exercise and make an effort to spell out what’s in it for them. Some of the benefits to communicate to the team may include:

Empowering individuals to have meaningful development conversations and take ownership of their careers.

Providing staff at all levels with a vehicle and direction for their professional development plans.

Establishing a baseline of current capability at an individual, team and organisational level.

This isn’t to say that a capability assessment can’t be used for more sinister purposes such as identifying “incapable” staff for upcoming redundancies – if this is the case, best of luck with writing the communication piece! But an assessment can also be a positive experience and can potentially help place participants on a meaningful professional development and career path.

What do you think? If you were asked to undertake a capability assessment would you view it with mistrust or see it as a positive opportunity?